The Rompetrol Group NV A privatization success story. Philip Stephenson Deputy CEO. Washington, May 11 th

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1 The Rompetrol Group NV A privatization success story Philip Stephenson Deputy CEO Washington, May 11 th

2 Table of Contents 1. The Rompetrol Group profile 2. The turnaround of the Petromidia refinery 3. Challenges in the Romanian oil industry today Overcoming myths Privatization of state owned SNP Petrom Breaking the political-economic nexus 4. Rompetrol s future 1

3 The Rompetrol Group - profile Largest private company in Romania (2003 gross revenues of approximately $1.2 billion), representing roughly 2.5% of GDP 28% share of Romanian refined products market Domiciled in Netherlands with worldwide operations and assets (though mostly in Romania) Owned 75% by management and 25% by OMV Financed principally by international banks; audited to IAS standards Active in upstream, refining, marketing and services One of the country s largest exporters and taxpayers ($ 416 million in tax payments in 2003) Achieved a landmark agreement with MOF in 4Q 2003 rescheduling historic tax liabilities Our online Investor Relations center (at provides transparent information on company operations via our 2003 Annual Report, management presentations and a White Book on the 3-year post-privatization history of the Petromidia refinery Our largest subsidiary, Rompetrol Rafinare SA, was listed on the Bucharest Stock Exchange on April 7 th, 2004 and broke all trading records (and the IT system!) on the first day 2

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5 We took command of an old, leaky boat, low on fuel that we had to steer through a storm, with pirate ships visible on the horizon. But with an excellent crew, we charted a course to a (relatively) safe harbor. 4

6 Privatization attempts Complexul Petrochimic Midia Navodari (the first name of Rompetrol Rafinare S.A) was a part of the large oil refining plants which appeared after 1975 In 1991, the entity was changed into a stock company by taking over all of the assets of the former unit. The Romanian Government attempted three privatizations of Petromidia The first attempt was carried out in 1997 when the State Ownership Fund (SOF) had discussions with Daewoo, Glencore and Petromidia USA The second effort was made over July January 1999 and resulted in a sales/purchase agreement for % in Petromidia s share capital with Turkish investor Akmaya Due to the disagreements between the Romanian authorities and Akmaya regarding the additional incentives the Government re-slated the sale of a controlling interest in Petromidia In a third effort, SOF concluded an agreement with the Rompetrol Group N.V. on 31 October Actual transfer of the stake was subsequently performed on 26 January

7 Crude Supply - considerations 6

8 Upgrade projects - ongoing Nr. crt. Project Investment value (USD) Yearly savings (USD) 1 Digital Control System: automated installation monitoring 23,000,000 12,000,000 2 Upgrade of the raw material transportation main routes 1,300, ,000 3 Upgrade of the water supply system 550, ,000 4 Maximize MTBE flow 325, , investment projects- completed 1 In-line blending system 6,800,000 2,800,000 2 Upgrade Midia Port 4,000,000 4,500,000 3 Upgrade Coking installation 2,300,000 1,500,000 Note: Short payback periods 7

9 Types of crude used Crude Oil Prices 8

10 Utilized capacity 3.3 mta 2003 Planned capacity 4.0 mta

11 Production additive and loss reduction MTBE averages $ 460/ton Saves $ 30 m/ year Evolution of total consumption and losses of materials from raw materials to finished products 10

12 Production 100% sour crude into 100% euro standard fuels Products Euro Products Sweet Crude Sour Crude 11

13 Production costs US$ 22/ton in 2003 Objectives US$ 18/ton in jan feb march april may june july august sept oct nov dec jan Month/

14 No. Staff Rompetrol Rafinare Ian 2001 March May July Sept Nov Ian March May July Sept Nov Productivity and performance increase Ian 2003 March May July Sept Nov Dec Ian ,000 10,000 9,005 46,470 1, Gross revenues/no. of employees Gross revenues/h/employee 13

15 State of the industry and challenges Industry Myths Romania has over 24 mta of refining capacity. Romania is a big oil producer. Product prices are free in Romania. Romania can sustain 5 big refineries. Industry Truths Romania s actual utilized capacity is only 12.7 mta Romania only produces ½ its own oil needs Government ownership of market leader Petrom leads to low subsidized prices and the lowest refinery margins in Europe Romania can sustain 3 big refineries 14

16 Over-capacity vs. reality Refineries: Real (2003) Nameplate - Arpechim - Pitesti 2,7 3,5 Mio t/y Petrom -Astra-Ploesti 0,6 2,8 Mio t/y - Petrobrazi - Ploiesti 2,8 3,5 Mio t/y Petrom - Petrolsub - Bacau 0,35 0,4 Mio t/y Fertinvest Holding - Petromidia - Midia 3,3 4.8 Mio t/y Rompetrol - Petrotel - Ploiesti 0 3,8 Mio t/y Lukoil - Darmanesti 0,4 0,8 Mio t/y - Rafo - Onesti 2,0 3,5 Mio t/y Balkan Petroleum -Steaua-Cimpina 0,2 0,5 Mio t/y -Vega - Ploiesti 0,35 0,5 Mio t/y Rompetrol TOTAL 12,70 24,2 15

17 Production vs. consumption Romanian Oil Consumption and Production, Barrels Per Day Consumption Production Year 16

18 Difference in prices (crude, Romania, EU) Crude prices Domestic sale price EU sale prices 17

19 Pricing policies - outcomes Difference of earnings in Romania and EU 355, , , , ,268 82,574 94,550 47, EU earnings Domestic earnings Loss due to state-controlled pricing policy (US$ 000) 148, ,724 65,719 34,

20 Survival of 3 out of 5 19

21 Privatization of SNP Petrom SNP Petrom is 93 % owned by the GOR (MEC) It is to be sold this June to a strategic investor after a transparent competitive bidding process. Three candidates (of an original 15 who expressed interest in August 2003) submitted final bids on April 15 th, 2004: OMV of Austria considered best placed because of a well prepared, compliant bid MOL of Hungary has presented two bids including a share-swap and a traditional offer Occidental of the USA rumor has it that the company is only looking to Petrom s Upstream business Privatization needs to be finished quickly and transparently Privatization will end de facto state control on fuel prices, leading to free competition for all players in the field 20

22 Investigations into privatization procedures Interest groups still active in Romania and receive strong political backing The PNA (GOR s prosecuting body of corruption offences) has launched an investigation into the privatization of Petromidia Although we suspect the initiation of the investigation was politically motivated, Rompetrol will cooperate fully with the PNA all through the process, which we hope will be: Professional Expeditious Apolitical Conclusions expected to vindicate the Rompetrol Group and also to disarm special interest groups 21

23 Rompetrol - strategy Rompetrol Group strives to become, through organic growth and sensible low-cost acquisitions that integrate with its existing operations, the leading low-cost provider of petroleum products in the Balkans We will do this by: Upstream: gradually integrating upstream by concentrating our E&P efforts in Romania, supported by our services expertise and equipment Midstream: Increasing the quantitative and qualitative performance of the Petromidia platform while upgrading to continue to EU quality standards (sulfur) Downstream: Maintaining an approximate balance between internal and external markets, while establishing direct selling operations in regional countries and building the retail brand in Romania Services: using services companies synergistically with the group (Rominserv), with third parties (Rompetrol Logisitics) or divesting them as non-core 22

ROMPETROL RAFINARE. Corporate Presentation -1-

ROMPETROL RAFINARE. Corporate Presentation -1- ROMPETROL RAFINARE Corporate Presentation 2007-1- Table of Contents Group Overview History Corporate Legal Structure Rafinare ( RRC ) Shareholders Operations * Refining * Petrochemicals * Marketing Strategy